Epic collapse! The world's largest $BTC whale suffered a massive loss of $12.4 billion in a single quarter. The faith wheel is collapsing—could your assets be next?

The market is experiencing a severe correction, with $BTC prices slipping into the $60,000 range, and panic sentiment beginning to spread. At this sensitive moment, the globally largest publicly traded company holding $BTC, Strategy, released its Q4 2025 financial report, and the data hit like a bucket of ice water, pouring over the market. The company reported a single-quarter net loss of $12.4 billion. On the day of the earnings release, its stock plummeted approximately 17%, with a cumulative decline of nearly 80% from the November 2024 all-time high. Once celebrated for its “$BTC Treasury” strategy, the company now plays a high-stakes gamble involving a split data set that could determine its survival.

The core contradiction in the report lies in the stark contrast between record-breaking accounting losses and a historically high holdings volume. First, the $17.4 billion operating loss and $12.4 billion net loss mainly stem from the new accounting standards adopted at the start of 2025. These standards require quarterly revaluation of all $BTC holdings at market prices, with price fluctuations directly impacting earnings. The ongoing decline in $BTC prices has caused the market value of holdings to shrink, directly translating into massive reported losses.

However, Strategy has not stopped buying. It repurchased 41,002 $BTC in January 2026. As of February 1, 2026, its total holdings reached 713,502 $BTC, approximately 3.4% of the total supply, maintaining its position as the largest corporate holder globally. To support this strategy, the company raised over $25.3 billion in capital during fiscal 2025, accounting for about 8% of all equity financing in the U.S. that year. It also established a $2.25 billion USD reserve to cover future two-and-a-half years of preferred stock dividends and debt interest, attempting to ease market concerns over its cash flow.

Based on a total cost of $54.26 billion and an average purchase price of $76,052 per $BTC, when the price was around $65,000, its unrealized loss on holdings exceeded $7.8 billion.

Ironically, Strategy’s traditional enterprise software business was almost marginalized in the report. In Q4, total software revenue was $123 million, a slight increase of 1.9% year-over-year; subscription service revenue was $51.8 million, up 62.1%; gross profit was $81.3 million, with a gross margin of 66.1%. While the business remains healthy and profitable, its hundreds-of-millions revenue scale contributes only a tiny fraction compared to the billions raised, holdings, and losses. The company has fully transformed into a leveraged $BTC exposure tool, with its fate deeply tied to $BTC price movements.

During the earnings call, CEO Phong Le mentioned that current net debt stands at $6 billion, with a leverage ratio of about 13%. He envisioned an extreme scenario: if $BTC drops 90% to $8,000, the value of its $BTC reserves would equal its net debt, making it impossible to repay convertible bonds with $BTC. In that case, debt restructuring, equity issuance, or new debt issuance might be considered. His long-term goal is to push the company toward equity, and if that path fails, to seek other ways to restructure debt, sustainably reduce leverage, avoid selling $BTC, and continue accumulating strategy.

Strategy’s business model relies on a fragile “flywheel”: long-term rising $BTC prices, continuous premium financing from capital markets, and both cycles driving stock price and holdings growth. Once $BTC falls below its average cost, risks are fully exposed.

The company’s issued perpetual preferred stock STRC currently offers a high dividend yield of 11.25%, which has been steadily increased since July 2025. This design aims to keep its price near the $100 face value and position it as a high-yield alternative. However, high yields come with high risks. The repayment capacity of STRC depends entirely on long-term $BTC appreciation and the company’s ability to continuously finance and buy more $BTC. In a prolonged bear market or financing difficulties, its reserves could deplete rapidly. The market has spoken with its feet; STRC is currently trading at $93.67, below its face value.

Another key indicator is mNAV, which measures the premium of the company’s stock valuation relative to its $BTC reserves. When mNAV exceeds 1, it indicates the market is willing to pay a premium for its leveraged strategy. Currently, this indicator has compressed to 1.07. Once it falls below 1, the financing channel may close, and the company will lose its buffer and replenishment capacity, becoming a passive recipient of $BTC price volatility. Notably, Le once stated in November 2025 that if mNAV falls below 1 and financing options dry up, selling $BTC is “mathematically” reasonable, though he emphasized this would be a last resort.

The most frightening aspect is not the current losses but the potential triggering of a negative feedback loop: $BTC price declines cause the company’s net assets to shrink, pushing mNAV below 1, eroding the premium, cutting off new funding, and making it unable to pay high interest and dividends. This forces the company to sell $BTC to raise cash, further depressing prices, shrinking net assets, and intensifying the cycle. This death spiral is the worst scenario for all market participants.

Facing this dilemma, co-founder Michael Saylor attempted to shift focus toward long-term positives during the earnings call. He emphasized that U.S. policy has undergone a fundamental shift, with the President and cabinet members expressing support for $BTC, and bipartisan consensus forming on digital asset regulation. On the financial side, major banks are rapidly launching $BTC trading, lending, and custody services, accelerating institutional adoption and reinforcing $BTC’s financial attributes.

Regarding security concerns like quantum computing threats, Saylor responded that commercial-grade threats are at least a decade away, and the $BTC community has the capacity for global upgrade consensus. He announced that Strategy will initiate a global $BTC security plan, collaborating with cybersecurity resources to research solutions for future threats like quantum computing, promoting industry healthy development.

If the market continues to decline, the $12.4 billion quarterly operating loss may just be the beginning. The real test will come when panic intensifies, premiums vanish, new funds dry up—will faith withstand gravity? For investors, Strategy now resembles a high-risk, high-reward option. If they bet right and $BTC rebounds, the flywheel restarts; if they bet wrong, the negative feedback cycle kicks in, leading to heavy losses. The outcome of this high-stakes gamble remains uncertain, but it has already sounded an alarm for the entire industry: excessive faith and unchecked leverage will ultimately face the backlash of harsh reality.